Aphria Stock Progress Short Lived After Earnings Surprise

Aphria stock

Aphria stock popped as much as 17% last week after Aphria Inc (TSX:APHA) (NYSE:APHA) surprised investors with its second consecutive quarter of profitability. However, the bullish sentiment was short-lived as analysts look at the company's fiscal 2020 guidance as unachievable.

Aphria Stock Gains on Surprise Profit

With analysts predicting Aphria Inc to post a net loss of 2 cents per share, the company surprised investors by generating a net profit of $16.4 million CAD, or 7 cents per share. Revenue of $126.1 million CAD was actually slightly down on analysts' forecasts of $131 million CAD but still gained $13.3 million CAD from the same period last year. The company attributed the marginal miss in revenue to its CC Pharma investment in Germany, where the medical reimbursement model recently changed. Despite the surprise results, Aphria stock is down 63% since last November.

While Aphria's second consecutive quarter of profitability makes it somewhat of a rarity in the cannabis industry and led to intraday gains of as much as 25%, Aphria stock has been brought crashing back down as the dust settles on those results. Analysts at Cornerstone Investments have described the results as "mediocre" and added that "Aphria's fiscal 2020 guidance now looks extremely aggressive."

>> Namaste Stock Consolidates Amidst Positive Announcements

Analysts Skeptical as Dust Settles

"Aphria only generated $31 million of sales last quarter from cannabis, but it needs to generate an average of ~$100 million of sales for each of the next three quarters. Based on the current market condition, we think it is safe to say that it will take some miracles for Aphria to hit that number," wrote one analyst at Cornerstone. Aphria stock has dropped over 12% in the week since the earnings were released.

Cornerstone may be underestimating Aphria Inc's potential in the 2.0 market, with cannabis derivatives such as edibles, vapes, and infused beverages expected to hit shelves by mid-December. It is worth remembering that the company is still awaiting Health Canada approval on its 1.4 million square foot Aphria Diamond facility in Leamington, Ontario, which should significantly improve Aphria's output as demand for cannabis derivatives increases in 2020. Aphria stock is currently valued at $6.28.

>> Read More Aphria News

Featured Image: Canva

If You Liked This Article Click To Share